Taisei Corp v Doo Ree Engineering & Trading Pte Ltd

• Jurisdiction: Singapore
• Judge: Francis Ng Yong Kiat AR
• Judgment Date: 03 July 2009
• Neutral Citation: [2009] SGHC 156
• Plaintiff Counsel: Thio Ying Ying and Tan Yeow Hiang (Kelvin Chia Partnership)
• Published date: 08 July 2009
• Court: High Court (Singapore)
• Defendant Counsel: Monica Neo (TSMP Law Corporation)
• Subject Matter: Administrative Law,Building and Construction Law,Statutory Interpretation

3 July 2009

Francis Ng Yong Kiat:

Introduction

1 These proceedings involved an application by the plaintiff, Taisei Corporation (“Taisei”), to set aside the adjudication determination in SOP Application No. SOP/AA88 of 2008 pursuant to section 27(5) of the Building and Construction Industry Security of Payment Act (Cap 30B) (“the SOP Act”).

2 I allowed the application and ordered that the adjudication determination be set aside. As there are few locally reported decisions on the scope of the court’s powers in dealing with applications under the SOP Act to set aside adjudication determinations, I have decided to set out my grounds of decision.

The undisputed facts

3 The undisputed background facts leading up to the present application can be summarised briefly.

4 Taisei had been appointed as the main contractor by the Land Transport Authority (“LTA”) to construct the Thomson, Botanic Gardens and Farrer Road Mass Rapid Transit (“MRT”) Stations. Taisei, in turn, appointed the defendant in these proceedings, Doo Ree Engineering & Trading Ltd (“Doo Ree”), as its sub-contractor to carry out reinforced concrete works for the Botanic Gardens MRT Station (“the Botanic Gardens Station project”).

5 Taisei appointed Doo Ree as its sub-contractor by way of a 4-page Letter of Award (“LOA”) dated 7 November 2006, a draft of which was forwarded to Doo Ree for consideration on or about 18 November 2006. The LOA was eventually signed by representatives of Taisei and Doo Ree on or about 21 December 2006 together with another 6-page document called the “Scope of Provision of Preliminaries between the Main Contractor and Sub-Contractor”.

6 On 4 October 2008, Taisei terminated Doo Ree’s appointment as its sub-contractor for the Botanic Gardens Station project.

7 On 29 November 2008, Doo Ree submitted its 25^th payment claim for the Botanic Gardens Station project, totalling $1,194,593.29, to Taisei.

8 On 16 December 2008, Doo Ree gave notice to Taisei of its intention to apply for adjudication; thereafter, on 19 December 2008, Doo Ree lodged an adjudication application with the Singapore Mediation Centre (“SMC”) and served a copy of the application on Taisei. On 20 December 2008, Taisei responded by letter to Doo Ree’s notice of 16 December 2008 and also enclosed a payment response (agreed by parties to have been in the proper form) which indicated that Taisei was not prepared to pay Doo Ree any part of its claim because of various charges claimed by Taisei against Doo Ree.

9 The adjudication subsequently commenced on 31 December 2008 and was conducted by Mr Tan Cheow Hin, an adjudicator appointed by the SMC. At the outset of the adjudication proceedings, Taisei raised four points of objection to Doo Ree’s adjudication application. These are summarised at paragraph 25 of the adjudication determination as follows:

(i) the Adjudication Application is premature because it was made before expiry of the time allowed for a payment response;

(ii) the adjudication application failed to comply with the requirements prescribed by the Building and Construction Industry Security of Payment Regulations 2005 (“Regulations”);

(iii) the Adjudication Application is premised on a flawed payment claim;

(iv) the Adjudication Application must be set off against the back-charges of $827,355.68, and $607,567.02 …

10 The adjudicator found against Taisei on the first three points, which he considered to be related to his jurisdiction, and proceeded to consider the substantive merits of the adjudication.

11 An adjudication determination was made on 3 February 2009 and was subsequently amended on 5 February 2009 (the amendments are not of consequence to this matter). The adjudication determination recorded that Doo Ree had succeeded in its claim to the extent of $444,503.18.

12 Following the adjudication determination, Taisei did not pay Doo Ree the adjudicated amount and did not apply for adjudication review. On 1 April 2009, Taisei commenced the present proceedings to set aside the adjudication determination.

The substantive issue in the originating summons

13 Based on Taisei’s submissions, the substantive issue for the court to determine in the present proceedings was whether the adjudication application was premature such that the adjudicator had no jurisdiction to make an adjudication determination. The answer to this question in turn depended on whether Clause 16.3 in a document described in the first affidavit of Taisei’s Contract Manager, Mr Lee Chin Lim (“Mr Lee”), as a “sub-contract agreement” was binding on the parties. This document, which I shall refer to hereafter as “the draft sub-contract”, comprised 128 pages and, apart from a cover page and contents page, was divided into four main sections, namely, the “Sub-contract Agreement”, the “Conditions of Sub-contract”, the Schedules and the Appendices.

14 The aforementioned Clause 16.3 was one of the provisions in the “Conditions of Sub-contract” section of the draft sub-contract and will be referred to hereafter simply as “Clause 16.3”. The portion of Clause 16.3 that is material for purposes of the present proceedings reads as follows:

Clause 16.3

Payment Due; Payment Withheld or Deferred; Interest

The Contractor shall respond to the payment claim submitted by the Sub-Contractor within 21 days after the payment claim is served.

15 The adjudicator found that Clause 16.3 was not binding on the parties. Before me, Taisei contended that the adjudicator had erred and that Clause 16.3 formed part of the terms of the sub-contract between the parties, whereas Doo Ree contended that this provision was not binding on the parties. Whether Clause 16.3 was binding on the parties was, in view of sections 11(1), 12(2) and 13(3)(a) of the SOP Act, of significance in determining the period within which an within which an adjudication application can be made. Sections 11(1), 12(2) and 13(3)(a) of the SOP Act provide:

Payment responses, etc.

11.—(1) A respondent named in a payment claim served in relation to a construction contract shall respond to the payment claim by providing, or causing to be provided, a payment response to the claimant —

(a) by the date as specified in or determined in accordance with the terms of the construction contract, or within 21 days after the payment claim is served under section 10, whichever is the earlier; or

(b) where the construction contract does not contain such provision, within 7 days after the payment claim is served under section 10.

Entitlement to make adjudication applications

12.—(1) …

(2) Where, in relation to a construction contract —

(a) the claimant disputes a payment response provided by the respondent; or

(b) the respondent fails to provide a payment response to the claimant by the date or within the period referred to in section 11 (1),

the claimant is entitled to make an adjudication application under section 13 in relation to the relevant payment claim if, by the end of the dispute settlement period, the dispute is not settled or the respondent does not provide the payment response, as the case may be.

Adjudication applications

13. —(1) …

(3) An adjudication application —

(a) shall be made within 7 days after the entitlement of the claimant to make an adjudication application first arises under section 12;

The “dispute settlement period” referred to in section 12(2) of the SOP Act is the period of 7 days after the date on which or the period within which the payment response is required to be provided under section 11(1) of the SOP Act: section 12(5) of the SOP Act.

16 The consequences of non-compliance with section 13(3)(a) of the SOP Act are spelt out in section 16(2)(a) of the SOP Act which provides

Commencement of adjudication and adjudication procedures

16. —(1) …

(2) An adjudicator shall reject —

(a) any adjudication application that is not made in accordance with section 13 (3) (a), (b) or (c);

17 Accordingly, as both parties agreed, if Clause 16.3 was binding on the parties:

(a) section 11(1)(a) of the SOP Act would apply and Taisei’s payment response of 20 December 2008 would have been provided within the 21-day time limit specified therein (the last day of this period being 22 December 2008, factoring in Hari Raya Haji on 8 December 2008 and the provisions of the Interpretation Act (Cap 1) on computation of time);

(b) the last day of the 7-day dispute settlement period would have fallen on 30 December 2008 (factoring in Christmas Day on 25 December 2008);

(c) Doo Ree would have been entitled to make an adjudication application within the next 7 days (i.e. from 31 December 2008 to 7 January 2009, factoring in New Year’s Day on 1 January 2009) by virtue of section 13(3)(a) of the SOP Act;

(d) Doo Ree’s adjudication application of 19 December 2008 would therefore have been premature and not made in accordance with section 13(3)(a) of the SOP Act; and

(e) the adjudicator ought to have rejected the adjudication application pursuant to section 16(2)(a) of the SOP Act.

18 On the other hand, if Clause 16.3 was not binding on the parties:

(a) section 11(1)(b) of the SOP Act would apply since there was no other contractual provision specifying when the payment response should be provided;

(b) Taisei’s payment response of 20 December 2008 would have been provided after the expiry of both the 7-day time limit specified in section 11(1)(b) (on 6 December 2008, i.e. 7 days after 29 November 2008) as well as the 7-day dispute settlement period following thereafter (on 15 December 2008, factoring in Hari Raya Haji on 8 December 2008 and the provisions of the Interpretation Act (Cap 1) on computation of time);

(c) Doo Ree would have been entitled to make an adjudication application within the next 7 days (i.e. from 16 – 22 December 2008);

(d) Doo Ree’s adjudication application of 19 December 2008 would therefore have been made in accordance with section 13(3)(a) of the SOP Act; and

(e) there would have been no grounds for the adjudicator to...